{"id":433397,"date":"2018-10-05T15:04:04","date_gmt":"2018-10-05T15:04:04","guid":{"rendered":"https:\/\/essaypaper.org\/business-finance-ips-var\/"},"modified":"2018-10-24T08:54:52","modified_gmt":"2018-10-24T08:54:52","slug":"business-finance-ips-var-2","status":"publish","type":"post","link":"https:\/\/www.benedictsol.com\/blogs\/business-finance-ips-var-2\/","title":{"rendered":"Business & Finance-IPS\/VAR"},"content":{"rendered":"

IPS\/VAR<\/strong>
\nYou have recently settled into the Ozarks to set up your financial advisory business. You meet Ruth (19 yrs old) and Wyatt (18 yrs old) Langmore, two cousins who have decided to combine their assets together to support the remainder of their family. They miraculously generated a sum of $3,200,000. Ruth currently is the operating a dance studio and earns $25,000 this past year while Wyatt is still in high school and manages to scrape by with $5,000 this past year. The current income pays off their expenses, leaving 15% of whatever income they have after taxes, which they believe will stay at that rate. The family currently has about $8,000 in loan shark debt at about 20% interest. Furthermore, Wyatt plans to go to college during the next year which will balloon expenses by another $30,000 a year for the next four years.
\nThe Langmores have no savings prior to this due to an obscure relative disappearing with all the money. You take some time to interview them to college a little information which can be broken down into the following excerpts:
\n\u00b7 \u201cWe don\u2019t really want to change our lifestyles, as we would like to avoid the unwanted attention.\u201d
\n\u00b7 \u201cGiven what has happened to our savings previously, we are not aiming for high returns and we would like to minimize volatile investments\u201d
\n\u00b7 \u201cWe would like the portfolio to at least combat inflation\u201d
\n\u00b7 \u201cWe would both like to continue to work despite the new found money. We don\u2019t really see ourselves retiring until 65+\u201d
\n\u00b7 \u201cOur income tax level is around 21.5% while our capital gains is taxed at 35%\u201d
\n\u00b7 \u201cIf possible, we would like to fund college for some of our cousins who should be entering college in 15 years\u201d
\ni) Determine the Langmore\u2019s willingness and ability to tolerate risk, their overall risk tolerance. (5 pts)
\nii) Let\u2019s assume that inflation is roughly 3.2%. Now calculate the following:
\n\u00b7 What are their expenses for the next year?
\n\u00b7 What is their net income for the next year?
\n\u00b7 What is the required return on the portfolio for the next year?
\niii) Determine the Langmore\u2019s time horizon, liquidity needs for the next year (hint, part of this is a number related to expenses), and legal, regulatory and tax considerations. Assume the details still hold from part (i) and living expenses have not increased as they did in part (ii)(5 pts)
\n2) Institutional IPS
\nAlexander Ellington, President of Ellington Foods, has contacted your firm to discuss the company\u2019s defined-benefit pension plan. He has provided the following information about the company and its pension plan:
\n\u00b7 Ellington Foods has annual sales of $300 million
\n\u00b7 The annual payroll is about $100 million
\n\u00b7 The average age of the work force is 43 years
\n\u00b7 30% of the plan participants are now retired
\n\u00b7 Company profits last year were $10 million and have been growing at 10% annually. The Ellington Foods pension plan has $80 million in assets and is currently overfunded by 10%
\n\u00b7 The duration of the plans liabilities is 15 years
\n\u00b7 The discount rate applied to the liabilities is 6%
\n\u00b7 Fund trustees wish to maintain 5% of plan assets in cash
\nEllington would like to achieve a rate of return of 6.5% on its pension fund (which is less than the 8.7% the fund has historically achieved). Ellington would like to be able to reduce contributions to the pension fund and possibly increase employee benefits.
\nFormulate and justify investment policy objectives for the Ellington Foods pension plan in the following three areas (15 pts total):
\ni) Return objective
\nii) Risk tolerance
\niii) Time horizon
\n3) VaR
\nSimilar to what we did in class, you will calculate the VaR for the Kospi2 (Korean Stock Exchange). You will be required to do the following in Excel:
\n\u00b7 Data is already provided
\n\u00b7 Calculate the daily VaR at the 95% and 99% confidence interval
\n\u00b7 Calculate the Annual VaR at the 95% and 99% confidence interval
\n\u00b7 Calculate the $ VaR based on a $25,000,000 portfolio at the 95% and 99% confidence interval
\nWhat you will need to provide is a snapshot summary of the requested results above as well as a short paragraph interpreting those results. Please also include your working excel sheet (formulas and all) when submitting. I have posted an example online of what we already did for the S&P500. (20 pts)
\ni) What are the excel quick keys for sorting data? (1 pt)
\nii) What do you need to do with the price data in order to actually calculate the standard deviation? (1 pt)
\niii) What do you use for calculations based off Yahoo data, close or adjusted close and why? (1 pt)
\niv) What is the data table summarizing everything?<\/p>\n","protected":false},"excerpt":{"rendered":"

IPS\/VAR You have recently settled into the Ozarks to set up your financial advisory business. You meet Ruth (19 yrs old) and Wyatt (18 yrs old) Langmore, two cousins who have decided to combine their assets together to support the Read More …<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[15],"tags":[],"class_list":["post-433397","post","type-post","status-publish","format-standard","hentry","category-essay-paper-writing"],"_links":{"self":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/433397","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/comments?post=433397"}],"version-history":[{"count":0,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/posts\/433397\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/media?parent=433397"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/categories?post=433397"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.benedictsol.com\/blogs\/wp-json\/wp\/v2\/tags?post=433397"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}